South Korean petchem industry commits to ethylene capacity cuts under government effort to boost competitiveness, revitalize sector

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The South Korean government has met with petrochemical industry representatives to discuss restructuring plans that could result in between 2.7 million metric tons per year (MMt/y) and 3.7 MMt/y of ethylene capacity being eliminated through the closure of naphtha crackers in the country, as per Chemweek.The meeting marked a major step in the government’s commitment to restructuring South Korea’s petchem sector, which faces structural overcapacity.The country’s ministry of trade, industry and energy (Motie) held on Aug. 20 what it called the “voluntary business restructuring agreement ceremony for the petrochemical industry's resurgence,” at the Korea Chamber of Commerce and Industry in Seoul.During the ceremony, the government outlined three key directions for petchem restructuring efforts: reducing excess capacity while transitioning to high-value-added specialty products; ensuring financial soundness; and minimizing the impact on regional economies and employment.Motie also confirmed three guiding principles for government support: simultaneous restructuring of South Korea’s three petchem complexes; sufficient self-rescue efforts alongside the development of feasible restructuring plans; and the establishment of a comprehensive government support package.Industry representatives announced plans at the meeting to reduce South Korea’s overall naphtha cracking capacity by between 2.7 MMt/y and 3.7 MMt/y, shift toward value-added and eco-friendly products, and mitigate adverse regional and national economic impacts using insights from industry consultants.According to data from S&P Global Commodity Insights, South Korea’s ethylene capacity totals 13 MMt/y. The three complexes where its naphtha crackers are located are at Ulsan, Daesan and Yeosu.Motie said that petchem companies have committed to developing a comprehensive business restructuring plan, including capacity closures, by the end of the year. The plan will include improvements to companies’ financial structures.The agreement’s emphasis on voluntary and proactive industry commitments to a major structural transition is considered significant. It is a departure from the industry’s previous strategies of holding out during cyclical downturns and marks the initiation of a fully-fledged restructuring effort, Motie said.The government will thoroughly assess the feasibility of the restructuring plans whe...

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